FRACTYL HEALTH INC

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other information included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q and the section titled “Forward-Looking Statements” included elsewhere herein. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “will,” “would,” and similar expressions to identify forward-looking statements.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other information included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties, assumptions, and other important factors. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q and the section titled "Forward-Looking Statements" included elsewhere herein. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We use words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "potential," "seek," "should," "will," "would," and similar expressions to identify forward-looking statements.

Previous wording

We are a metabolic therapeutics company focused on pioneering new approaches to the treatment of metabolic diseases, including type 2 diabetes and obesity. We aim to develop durable disease-modifying therapies that are designed to provide long-term maintenance of metabolic health without requiring lifetime treatment by targeting the organ-level root causes of T2D and obesity.

Current wording

We are a metabolic therapeutics company focused on pioneering new approaches to the treatment of metabolic diseases, including obesity and type 2 diabetes. We aim to develop durable disease-modifying therapies that are designed to provide long-term maintenance of metabolic health without requiring lifetime treatment by targeting the organ-level root causes of obesity and T2D.

Previous wording

Since our formation in 2010, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights and conducting discovery, research and development activities for our product candidates. The Revita DMR System, or Revita, is approved in Europe under a Conformitè Europëenne, or CE mark and has received reimbursement authorization through NUB in Germany for the treatment of T2D. In the first half of 2023, we initiated a limited commercial pilot in a single center in Dusseldorf, Germany. We do not have any products approved for sale in the United States. To date, we have financed our operations primarily through the proceeds from sales of our convertible preferred stock, sales of our common stock in our initial public offering and debt financing.

Current wording

Since our formation in 2010, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights and conducting discovery, research and development activities for our product candidates. The Revita DMR System, or Revita, is approved in Europe under a Conformitè Europëenne, or CE mark and has received reimbursement authorization through NUB in Germany for the treatment of T2D. In the first half of 2023, we initiated a limited commercial pilot in a single center in Dusseldorf, Germany. We do not have any products approved for sale in the United States. To date, we have financed our operations primarily through the proceeds from sales of our convertible preferred stock, sales of our common stock in our initial public offering ("IPO") and debt financing.

Previous wording

We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of one or more of our current or future product candidates in the United States. For the three months ended March 31, 2024 and 2023, we incurred net losses of $3.3 million and $11.9 million respectively. As of March 31, 2024, we had an accumulated deficit of $349.9 million. We expect to continue to incur significant losses for the foreseeable future and we expect these losses to increase substantially if and as we:

Current wording

We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of one or more of our current or future product candidates in the United States. For the three and six months ended June 30, 2024, we incurred net losses of $17.2 million and $20.6 million, respectively. Our net loss was $30.2 million and $42.2 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $367.2 million. We expect to continue to incur significant losses for the foreseeable future and we expect these losses to increase substantially if and as we:

Previous wording

We plan to continue to enroll more patients in the Germany Real-World Registry across several centers and will continue to report on clinical, health economic, and patient-relevant outcomes from this study on an ongoing basis.

Current wording

We plan to continue to enroll more patients in the Germany Real-World Registry across several centers and will continue to report on clinical, health economic, and patient-relevant outcomes from this study on an ongoing basis. We are planning to disclose additional registry data from a larger number of patients at a scientific congress later this year.

Previous wording

There have been no material changes to the components of our results of operations described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report, except as stated below.

Current wording

There have been no material changes to the components of our results of operations described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024 (our "Annual Report"), except as stated below.

Previous wording

Our significant accounting policies are described in more detail in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q as well as Note 2 to our audited financial statements as of and for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the SEC on April 1, 2024. There have been no material changes to the accounting policies most critical to aid in fully understanding and evaluating our unaudited condensed consolidated financial condition and results of operations contained in our Annual Report.

Current wording

Our significant accounting policies are described in more detail in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q as well as Note 2 to our audited financial statements as of and for the year ended December 31, 2023 included in our Annual Report. There have been no material changes to the accounting policies most critical to aid in fully understanding and evaluating our unaudited condensed consolidated financial condition and results of operations contained in our Annual Report.

Previous wording

Three months ended March 31, 2024 and 2023

Current wording

Comparison of three months ended June 30, 2024 and 2023

Previous wording

The following table summarizes our condensed consolidated results of operations for the years ended March 31, 2024 and 2023.

Current wording

The following table summarizes our condensed consolidated results of operations for the three months ended June 30, 2024 and 2023.

Previous wording

Revenue and cost of goods sold during the three months ended March 31, 2024 and 2023 was related to our pilot commercial launch in Germany that was initiated in the first quarter of 2023.

Current wording

Revenue and cost of goods sold during the three months ended June 30, 2024 and 2023 was related to our pilot commercial launch in Germany.

Previous wording

Selling, general and administrative expenses increased by $4.4 million, or 158.4%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to the increased personnel-related expenses as well as professional services, facilities, and insurance expenses. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $0.4 million as a result of the expansion of our workforce. In addition, stock-based compensation increased by $2.9 million primarily due to new option grants issued as well as the achievement of the performance condition under certain restricted stock units as a result of the completion of our IPO, which resulted in $1.9 million stock-based compensation being recognized in the three months ended March 31, 2024. Professional services expenses increased by $0.5 million primarily due to the increased legal, audit and accounting expenses incurred to operate as a public company. Insurance expenses increased by $0.2 million mainly due to higher public company D&O insurance premium. Allocated facilities expenses increased by $0.2 million as our new office and laboratory space lease in Burlington, Massachusetts, commenced on November 1, 2023.

Current wording

Selling, general and administrative expenses increased by $3.5 million, or 126.2%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to increased professional services, insurance and facilities expenditures, as well as personnel-related expenses. Professional services expenses increased by $0.5 million primarily due to the increased legal, audit, accounting and other administrative expenses incurred to operate as a public company. Insurance expenses increased by $0.3 million mainly due to higher public company director and officer ("D&O") insurance premium. Allocated facilities expenses increased by $0.2 million as our new office and laboratory space lease in Burlington, Massachusetts, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $0.6 million as a result of the expansion of our workforce. In addition, stock-based compensation increased by $1.8 million primarily due to new options and RSUs issued.

Previous wording

We recognized a gain of $10.4 million from the decrease in fair value of warrant liabilities during the three months ended March 31, 2024, which consisted of $8.8 million gain related to the July 2023 Warrants, $1.5 million gain related to the September 2023 Warrants and $0.1 million gain related to the 2014 Warrants. The decrease in the fair value of the underlying stocks to be purchased under these warrants, which is our common stock, resulted in the decrease of the fair value of these warrants.

Current wording

We recognized a gain of $4.7 million from the decrease in fair value of warrant liabilities during the three months ended June 30, 2024, which consisted of $4.1 million gain related to the July 2023 Warrants and $0.6 million gain related to the September 2023 Warrants. The decrease in the fair value of these warrants was mainly due to the decrease in the fair value of the underlying shares of common stock. We recognized a loss of $0.1 million from the change in fair value of warrant liabilities during the three months ended June 30, 2023 related to the 2014 Warrant, which was due to the increase in the fair value of the underlying shares of preferred stock to be purchased under the warrant.

Previous wording

In addition, interest income earned from our cash deposits increased by $0.7 million due to higher deposit balances upon the completion of our IPO as well as higher interest rates.

Current wording

In addition, interest income earned from our cash deposits increased by $1.2 million due to higher deposit balances upon the completion of our IPO as well as higher market interest rates.

Previous wording

Research and development expenses increased by $5.1 million, or 54.3%, during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to increased personnel-related expenses as well as clinical and facilities expenditures. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $0.5 million as a result of the expansion of our workforce and our effort to bring certain clinical and scientific resources in house. In addition, stock-based compensation increased by $1.5 million primarily due to new option grants issued as well as the achievement of the performance condition under certain restricted stock units as a result of the completion of our IPO, which resulted in $0.8 million stock-based compensation being recognized in the three months ended March 31, 2024. Clinical study expenses increased by $2.3 million due to the progress made in Revitalize-1. Allocated facilities expenses increased by $1.4 million as our new office and laboratory space lease in Burlington, MA, commenced on November 1, 2023. These increases were partially offset by a decrease of $0.7 million in engineering and medical affairs expenditures primarily as a result of reduced product development effort and the timing of the expenditures incurred with the collaborative medical research projects.

Current wording

Research and development expenses increased by $12.7 million, or 68.7%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to increased clinical, Rejuva and facilities expenditures, as well as personnel-related expenses. Clinical study expenses increased by $4.9 million due to the initiation of Remain-1 and the progress made in Revitalize-1. Allocated facilities expenses increased by $2.5 million as our new office and laboratory space lease in Burlington, MA, commenced on November 1, 2023. Rejuva-related expenditures increased by $0.9 million due to continued development in our Rejuva program. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $2.2 million as a result of the expansion of our workforce and our effort to bring certain clinical and scientific resources in house. In addition, stock-based compensation increased by $2.4 million primarily due to new option and RSUs issued. These increases were partially offset by a decrease of $0.2 million in medical affairs expenditures primarily due to the timing of the collaborative medical research projects.

Previous wording

We recognized a gain of $8.0 million from the decrease in fair value of the 2022 Convertible Notes during the three months ended March 31, 2024, compared to a loss of $0.2 million from the increase in fair value of the 2022 Convertible Notes during the three months ended March 31, 2023, resulting in a total fluctuation of $8.2 million between the two comparative periods. The decrease in fair value of the 2022 Convertible Notes during the three months ended March 31, 2024 was primarily driven by the decline in our common stock value after IPO. Upon the closing of the IPO on February 6, 2024, all of the outstanding principal plus accrued interest under the 2022 Convertible Notes were converted into our common stock. The 2022 Convertible Notes were marked to market to its fair value as of the time of the conversion before being reclassified to equity. The gain from the decrease in fair value of the 2022 Convertible Notes was offset by a loss of $1.3 million from the increase in fair value of the 2023 Notes during the three months ended March 31, 2024 mainly due to interest accrual on the 2023 Notes.

Current wording

We recognized a gain of $8.0 million from the decrease in fair value of 2022 Convertible Notes during the six months ended June 30, 2024, which was primarily driven by the decline in our common stock value after the IPO. Upon the closing of the IPO on February 6, 2024, all of the outstanding principal plus accrued interest under the 2022 Convertible Notes were converted into our common stock. The 2022 Convertible Notes were marked to market to its fair value as of the time of the conversion before being reclassified to equity. The gain from the decrease in fair value of the 2022 Convertible Notes was offset by a loss of $1.6 million from the increase in fair value of the 2023 Notes during the six months ended June 30, 2024 due to a combination of the fluctuation of market interest rate and the accrual of the PIK interests.

Previous wording

We believe that we maintain a level of liquidity sufficient to allow us to meet our cash needs in the short-term. Over the long-term, we manage our cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. We continuously assess our working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements and future investments.

Current wording

We believe that we maintain a level of liquidity sufficient to allow us to meet our cash needs in the short-term. Over the long-term, we manage our cash and capital structure to maximize shareholder return, maintain our financial condition and maintain flexibility for future strategic initiatives. We continuously assess our working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements and future investments.

Previous wording

As of March 31, 2024, we had approximately $121.4 million of cash and cash equivalents. On February 6, 2024, we completed our IPO, in which we issued and sold 7,333,333 shares of our common stock at a price to the public of $15.00 per share, resulting in net proceeds to us of approximately $98.9 million, after deducting the underwriting discounts and other offering expenses. On March 5, 2024, we issued an additional 99,999 shares of our common stock pursuant to the partial exercise of the underwriters’ option to purchase additional shares at the IPO public price of $15.00 per share, for additional net proceeds of approximately $1.4 million, after deducting the underwriting discounts and commissions.

Current wording

As of June 30, 2024, we had approximately $102.4 million of cash and cash equivalents. On February 6, 2024, we completed our IPO, in which we issued and sold 7,333,333 shares of our common stock at a price to the public of $15.00 per share, resulting in net proceeds to us of approximately $98.9 million, after deducting the underwriting discounts and other offering expenses. On March 5, 2024, we issued an additional 99,999 shares of our common stock pursuant to the partial exercise of the underwriters’ option to purchase additional shares at the IPO public price of $15.00 per share, for additional net proceeds of approximately $1.4 million, after deducting the underwriting discounts and commissions.

Previous wording

The credit agreement, as amended, contains the following financial covenants: (i) a minimum liquidity covenant requiring us to maintain a minimum $10.0 million balance in cash and cash equivalents on deposit in accounts, subject to certain exceptions, and (ii) a financing milestone covenant requiring that (a) we have received proceeds from an equity financing or series of financings (including the net proceeds from the IPO) of at least $40.0 million during the period commencing on September 7, 2023 and ending on or prior to February 15, 2024, and (b) we have received equity financing or series of financings of at least $100.0 million (inclusive of such equity financing or series of financings in the preceding clause (a)) during the period commencing as of September 7, 2023 and prior to June 30, 2024.

Current wording

The credit agreement, as amended, contains the following financial covenants: (i) a minimum liquidity covenant requiring us to maintain a minimum $10.0 million balance in cash and cash equivalents on deposit in accounts, subject to certain exceptions, and (ii) a financing milestone covenant requiring that (a) we have received proceeds from an equity financing or series of financings (including the net proceeds from the IPO) of at least $40.0 million during the period commencing on September 7, 2023 and ending on or prior to February 15, 2024, and (b) we have received equity financing or series of financings of at least $100.0 million (inclusive of such equity financing or series of financings in the preceding clause (a)) during the period commencing as of September 7, 2023 and prior to June 30, 2024. As of June 30, 2024, we were in compliance with the financial covenants and other terms of the arrangement.

Previous wording

The outstanding balances under the 2023 Notes bear interest at a floating annual rate equal to the greater of 5.5% above the Wall Street Journal prime rate or 13.25%. On and prior to September 30, 2024, 6.0% of the interest is payable in kind and added to the outstanding principal amount of the 2023 Notes. Beginning September 30, 2026, we are required to make principal payments in the amount of 1.5% of the aggregate principal amount outstanding, including accrued PIK interest, each month. The first principal payment date can be extended to September 30, 2027, at our election, if certain financing milestones as defined in the 2023 Notes are achieved on or prior to September 30, 2026. In addition, upon any principal payment, we are required to make an additional payment to the Lenders a 6.0% fee, or the Exit Fee, over the principal and accrued PIK interest paid. The aggregate Exit Fee of the 2023 Notes should equal to 6.0% of the total commitment of $45.0 million plus all accrued PIK interest. All remaining outstanding principal balance, accrued interest and Exit Fee on the 2023 Notes shall be due and payable on the maturity date of September 7, 2028.

Current wording

The outstanding balances under the 2023 Notes bear interest at a floating annual rate equal to the greater of 5.5% above the Wall Street Journal prime rate or 13.25%. On and prior to September 30, 2024, 6.0% of the interest is payable in kind and added to the outstanding principal amount of the 2023 Notes. Beginning September 30, 2026, we are required to make principal payments in the amount of 1.5% of the aggregate principal amount outstanding, including accrued PIK interest, each month. Under the terms of the credit agreement, the first principal payment date can be extended to September 30, 2027, at our election, if certain financing milestones as defined in the 2023 Notes are achieved on or prior to September 30, 2026. As of June 30, 2024, we achieved the defined milestones and can therefore elect to extend the first principal payment date to September 30, 2027. In addition, upon any principal payment, we are required to make an additional payment to the Lenders of a 6.0% fee, or the Exit Fee, over the principal and accrued PIK interest paid. The aggregate Exit Fee of the 2023 Notes should equal to 6.0% of the total commitment of $45.0 million plus all accrued PIK interest. All remaining outstanding principal balance, accrued interest and Exit Fee on the 2023 Notes shall be due and payable on the maturity date of September 7, 2028.

Previous wording

As of March 31, 2024, the balance of the 2023 Notes was carried at its fair value of $28.7 million.

Current wording

As of June 30, 2024, the balance of the 2023 Notes was carried at its fair value of $28.4 million.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $121.4 million. Based on our current business plans, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses, debt repayment obligations and capital expenditure requirements through 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $102.4 million. Based on our current business plans, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses, debt repayment obligations and capital expenditure requirements into the fourth quarter of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Previous wording

Cash used in operating activities of $11.7 million for the three months ended March 31, 2024 was primarily driven by personnel-related expenses, including salaries, bonuses, and other compensatory benefits, and spending on our ongoing Revitalize-1 study, Rejuva-related research activities, as well as professional services related to our corporate and general administrative activities. Cash used in operating activities resulted primarily from our net loss of $3.3 million adjusted for net non-cash income of $11.8 million, primarily consisting of $7.3 million gain from change in fair value of notes payable (non-cash portion), $10.4 million gain from change in fair value of warrant liabilities, offset by $5.2 million stock-based compensation and $0.7 million non-cash operating lease expense. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $3.4 million.

Current wording

Cash used in operating activities of $30.4 million for the six months ended June 30, 2024 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net loss of $20.6 million adjusted for net non-cash income of $12.4 million, primarily consisting of $15.1 million gain from change in fair value of warrant liabilities and $7.6 million gain from change in fair value of notes payable (non-cash portion), offset by $9.0 million stock-based compensation, $1.1 million non-cash operating lease expense and $0.2 million depreciation. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $2.5 million.

Previous wording

Cash used in operating activities of $9.6 million for the three months ended March 31, 2023 was primarily driven by personnel-related expenses, including salaries, bonuses, and other compensatory benefits, spending on our ongoing Revitalize-1 study, Rejuva-related research activities, product engineering as well as professional services related to our corporate and general administrative activities. Our net loss of $11.9 million was partially offset by non-cash items totaling $1.4 million, primarily consisting of $0.9 million stock-based compensation, $0.2 million non-cash operating lease expense and $0.2 million loss from change in fair value of convertible notes payable. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $1.0 million.

Current wording

Cash used in operating activities of $21.2 million for the six months ended June 30, 2023 was primarily driven by spending on our ongoing clinical study, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Our net loss of $42.2 million was partially offset by non-cash items totaling $20.8 million, primarily consisting of $18.6 million loss from change in fair value of convertible notes payable, $1.9 million stock-based compensation, $0.2 million of depreciation and $0.1 million loss from change in fair value of warrant liabilities. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $0.1 million.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 and 2023 were related to the purchase of property and equipment. The increase in the three months ended March 31, 2024 compared with the three months ended March 31, 2023 was primarily due to our spending on leasehold improvement and office furniture as we moved into our new office and laboratory space in Burlington, MA.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 and 2023 were related to the purchase of property and equipment. The increase in the six months ended June 30, 2024 compared with the six months ended June 30,

Previous wording

Cash provided by financing activities of $101.0 million for the three months ended March 31, 2024 was primarily driven by the $103.7 million capital raised from the IPO, net of discounts and commissions, partially offset by $2.9 million payments of public offering costs made to third-party service providers. We also received proceeds of $0.2 million from stock option exercises.

Current wording

Cash provided by financing activities of $101.0 million for the six months ended June 30, 2024 was primarily driven by the $103.7 million capital raised from the IPO, net of discounts and commissions, partially offset by $2.9 million payments of public offering costs made to third-party service providers. We also received proceeds of $0.2 million from stock option exercises.

Previous wording

As of March 31, 2024, our lease commitments reflect payments due for our operating and finance leases. The operating leases include corporate office space in Lexington, MA that will expire in April 2024, and new corporate office and laboratory space in Burlington, MA that will expire in June 2034. The finance leases represent leases of laboratory equipment used in our Rejuva pre-clinical activities. As of March 31, 2024, our future contractual commitments for our leases were $59.8 million. For additional information on our leases and timing of future payments, please see Note 7— "Commitments and Contingencies" to the unaudited condensed consolidated financial statements included in this Quarterly Report on this Form 10-Q.

Current wording

As of June 30, 2024, our lease commitments reflect payments due for our operating and finance leases. The operating leases include our corporate office and laboratory space in Burlington, MA that will expire in June 2034. The finance leases represent leases of laboratory equipment used in our Rejuva pre-clinical activities. As of June 30, 2024, our future contractual commitments for our leases were $60.9 million. For additional information on our leases and timing of future payments, please see Note 7— "Commitments and Contingencies" to the unaudited condensed consolidated financial statements included in this Quarterly Report on this Form 10-Q.

Previous wording

We have also entered into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies, manufacturing, and other services and products for operating purposes. These contracts typically do not contain any minimum purchase commitments and provide for termination upon notice. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. For example, on April 3, 2024, we entered into a Master Services Agreement and two Scopes of Work with Forge Biologics, Inc. (wholly owned subsidiary of Ajinomoto Co.) (“Forge”) to produce cGMP-grade RJVA-001 for Fractyl’s first-in-human clinical studies. Forge will perform process and analytical development, manufacturing scale-up, and cGMP manufacturing in its facility in Columbus, Ohio. The scope of the services between Fractyl and Forge are intended to support CTA-enabling nonclinical studies, as well as the manufacture of cGMP-grade RJVA-001 for a first-in-human clinical study. The Master Services Agreement terminates at the later of completion of services under all Statements of Work or April 2, 2030. The Master Services Agreement includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, payments, remedies, terminations and warranties.

Current wording

We have also entered into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies, manufacturing, and other services and products for operating purposes. These contracts typically do not contain any minimum purchase commitments and provide for termination upon notice. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.